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China's COVID lockdowns made its people depressed and hurt its economy
China’s economy keeps slowing down, and that could be a problem for the rest of the world.
On GZERO World, Shaun Rein, founder and managing director of the China Market Research Group, sits down with Ian Bremmer to explain why he’s become bearish on China’s economic outlook.
2023 was supposed to be the year China’s economy came roaring back after almost three years of brutal zero-COVID lockdowns that ground domestic spending and production to a halt. But Rein points to a few reasons why China’s rebound hasn’t exploded the way some economists predicted.
“I think people underestimated how much the lingering effects, not just economically but physiologically, that [zero-COVID] would have on China,” Rein says, pointing out that 50% of people in Shanghai suffer from anxiety and depression, according to the government.
Rein argues that because income levels in 2022 stayed so low, with millions of Chinese locked down and furloughed from their jobs, the revenge spending expected after zero-COVID ended never materialized. He also says that an increasingly hostile geopolitical environment under the Biden administration has made COVID recovery even more challenging.
Watch the GZERO World episode: China’s economy in trouble
And watch GZERO World with Ian Bremmer every week on gzeromedia.com/gzeroworld and on US public television. Check local listings.
- China flirts with deflation. Why is that a bad thing? ›
- The Graphic Truth: China's old vs. new zero-COVID ›
- China’s zero-Covid woes deepen ›
- Birdsong and stolen cherries: Lockdown life in Shanghai ›
- “Health is a human right”: How the world can make up progress lost to COVID - GZERO Media ›
- The US vs TikTok (and China) - GZERO Media ›
Shanghai skyline at night.
US risky business in China
Doing business in China has never been straightforward. But now it's becoming dangerous for (some) American companies.
On Wednesday, Chinese cops raided the Shanghai offices of US consulting firm Bain, questioning local employees and taking away computers and phones. No explanation was given by the police or the Boston-based firm, but the search was carried out the same day that China expanded its espionage law, giving authorities greater powers to inspect premises and digital devices of local businesses. (This comes a month after China arrested five Americans working at the due-diligence firm Mintz and shut down its Beijing HQ.)
These episodes highlight the increasingly risky environment for US businesses operating in China, the world's largest economy. As US-China relations get frostier, a whopping 87% of US execs surveyed by the AmCham industry group say they’re pessimistic about the future.
The bad vibes pose a dilemma for Xi Jinping. While these moves send a strong message to Washington — and play well at home, feeding into the narrative that American capitalists are stealing China's wealth — Xi needs all the investment he can get to help the Chinese economy recover from the wreckage of zero-COVID.
COVID protests spread in China
Ian Bremmer's Quick Take: My goodness, speaking of kicking off your week, all across China, demonstrations of the sort that we have certainly not seen under Xi Jinping rule about COVID, about zero COVID, and the loss of liberties that Chinese citizens have faced, but also increasingly moving towards demands for free speech and open media, and even Xi Jinping's removal, certainly unprecedented in this country in the last decade. Xi now, of course, on his third term, having removed term limits, consolidated extraordinary power, but some people really aren't happy about it.
What's going on here? Well, first of all, the proximate cause, the spark that set this all off was an apartment building fire in Xinjiang, where the firefighters were not able to adequately respond because of COVID quarantine measures. So, they couldn't get hoses to actually fight the fire because they weren't allowed in, they didn't have the keys, it was locked down. And as a consequence, a lot of Chinese citizens died. That led to demonstrations all over the country, ostensibly in solidarity with this incredibly poor mistake on the part of local Chinese leaders in Xinjiang, but also really increasingly frustrated with the fact that zero COVID in China has been an incredible disruption to daily life for hundreds of millions of Chinese.
You get one case and suddenly you can lock down your entire apartment block. You were in contact with somebody who was in contact with someone that was positive and so much for your ability to get into a workplace or a restaurant. And these apps which monitor your every move, and unless you're green, you are not going anywhere as a Chinese citizen. And they're testing you across the country every two days. And they're watching while the rest of the world and the World Cup, for example, is all out and they're celebrating and they're in post-COVID life. And that's not the case in China at all.
Very interesting to see that the classes of people that are angry here are across the map. You've got students in universities across the country. You've got workers in factories that have been locked down, that are stuck in the dormitories or stuck in their places of work for weeks on end. You've got members of the middle-class in shopping malls in higher end locations. The urban intelligentsia in Shanghai, which led to some of the first significant outcry after their quarantines and lockdowns were fairly badly handled. And of course, as the wealthiest city in China, very educated city in China, the feeling was, well, how can our government get this wrong? We're the ones that are supposed to do everything right. Well, not at all.
Now, it's important to recognize that we're not talking about scenes that are violent. There have been a number of arrests, but nothing like significant repression on the part of the Chinese police forces or army so far, which means that the Chinese government is allowing this to play out at least over the course of the weekend. And I do expect that some of the response from the Chinese government will be an admission that zero COVID measures have not been effectively rolled out across the entire country that have not been equivalently rolled out across the entire country. By the way, that is true. And a number of local and regional officials will be forced to fall on their sword will be removed, some will be arrested, corruption, incompetence, I mean, we've certainly seen that movie before in China. And there's a lot that Xi Jinping can do in response to that as well as cracking down to a harder degree at the same time that would take a lot of these people off the streets.
So this is not a threat to Xi Jinping's regime or his rule. And if we look back to 1989, in the months leading up to the Tiananmen Square massacre, demonstrations and massacre, you would've seen millions of people demonstrating across the country in cities everywhere. That is nothing remotely like what we're seeing right now.
But the key point here is that Xi Jinping's ability to respond to changing zero COVID is limited. There are record numbers of cases in China, nothing like what we see in the United States, but far greater than China has seen since the beginning of COVID outbreaks a couple of years ago. And a lot of Chinese are not vaccinated, and those that are, most of them were vaccinated a couple of years ago. Particularly when we look at older populations that are very vulnerable. China's own vaccines have been very limited in efficacy, less so than mRNA vaccines in the West. They're not willing to approve mRNA vaccines from the West. And while they have gone faster with approvals for therapeutics in response to COVID, they still don't have distribution taken care of on the ground in China. And so they don't have the widespread therapeutics that exist in the West either. So they're still at a minimum months away from meaningful reductions and relaxations of zero COVID policy in China. And that means that Xi Jinping's ability to truly address the anger that we're seeing on the streets is going to be mostly about stick, it's not about carrot.
Now, of course, with the surveillance state that China presently runs, they have the capacity to do that in a way that really no other state at scale can. But that does imply more violence. It does imply more repression. It also implies, and this is critical, longer reduced economic growth, bigger disruptions in supply chain. It's very interesting right now, I saw oil prices are basically trading at the top of their pre-Russian invasion range. Why? Because of expectations that zero COVID is going to be a bigger economic problem for longer. I think that's absolutely right, that the Chinese are going to have to deal with lower quality and lower realities of growth through 2023 at an absolute minimum.
Another thing I'd mention is that during Xi Jinping's private bilaterals at the G-20 in Bali, just a week and a half ago, he wasn't bringing up zero COVID at all. It didn't show up in those conversations unless he was proactively asked about it. In part, maybe because at the time he didn't think it was a crisis, certainly wasn't planning on making any significant announcements anytime soon. I think that's where we are right now.
So they're stuck, they're in a corner. This isn't major instability, but it's absolutely bearing watching out and certainly will have a major impact on the global economy in 2023. That's it for me. Hope everyone's well, and I'll talk to y'all real soon.
People gather for a vigil and hold white sheets of paper to protest COVID restrictions in Beijing, China.
What We're Watching: China losing on zero-COVID, "winning" in Taiwan
Chinese people vs. zero-COVID
Unprecedented protests against Xi Jinping and his controversial zero-COVID policy have hit the streets and college campuses across China. On Saturday, demonstrators in the financial hub of Shanghai, the country’s largest city, waved blank sheets of paper to show defiance and demanded the unthinkable: that the all-powerful Xi step down. Similar scenes were seen from Beijing to Nanjing.
Such widespread protests are extremely rare in tightly controlled China, especially against Xi. But zero-COVID, despite recent tweaks, has not only affected everyday life and the economy — it may also have been the cause of a recent fire that killed 10 people in Urumqi, the capital of the northwestern Xinjiang region. While the tragedy may have sparked the latest round of protests, for months snap lockdowns have been triggering clashes between residents and officials in other cities. China’s low vaccination rate, ineffective homegrown vaccines, and the high elderly population support Beijing’s insistence on zero-COVID. However, the policy isn’t working anymore, with case numbers now hitting record highs. Xi just got a third term as Communist Party boss, putting him on the path to likely rule as long as he wants. Will the recent protests — which so far have been met with strong police action — force him to rethink the policy, or double down on it?
On Monday, some big cities responded to the unrest by (slightly) relaxing COVID curbs. However, Beijing and Shanghai stepped up security in protest areas and national state media clarified that zero-COVID is here to stay.
Taiwan’s ruling tough-on-China party gets clobbered
Taiwan's President Tsai Ing-wen stepped down as leader of the ruling Democratic Progress Party after it lost big to the opposition Kuomintang party, or KMT, in Saturday's local elections. As expected, the KMT, which has long favored closer ties with Beijing but denies being pro-China, swept the polls across most big cities. The DPP had tried to turn the election into a referendum on protecting Taiwan's democracy from Chinese encroachment, but it didn't work: Voters responded better to the KMT's pitch about prioritizing local issues such as COVID and the economy. Meanwhile, the upstart Taiwan People's Party — seen as a rising alternative to the DPP and KMT — turned heads by capturing Hsinchu, known as the self-ruled island's Silicon Valley because it is home to many semiconductor companies. The result ups the ante ahead of the 2024 presidential election, when voters will likely be more worried about China's growing threat. A KMT victory would be welcomed by Beijing, but success in local elections doesn't necessarily mean it'll do well in 2024. After all, in early 2020, the DPP recovered from a similar local election defeat to reelect Tsai in a landslide.
Brazil's outgoing President Jair Bolsonaro votes during the election runoff in Rio de Janeiro.
What We’re Watching: Bolsonaro’s next move, China’s forever zero-COVID, Iran’s public trials
What’s Bolsonaro gonna do?
Brazil’s Jair Bolsonaro will speak publicly on Tuesday for the first time about the presidential election, which he officially lost on Sunday to Luiz Inácio Lula da Silva by just under two points. Unlike in some other countries — ahem — Brazil’s unified electronic system counts all the votes at once, on the day of the election, and that’s that. But the right-wing Bolsonaro has spent months casting doubt on the credibility of that system itself, repeatedly hinting that he might not accept the result if he loses. Meanwhile, his supporters have cried foul at heavy-handed efforts by courts and electoral authorities to police fake news in the run-up to the vote. Truckers who support him have already blocked roads in 20 of Brazil’s 26 states. Some analysts fear a January 6 insurrection or worse, given Bolsonaro’s cozy ties to the military. Does he really think he can overturn the result? Probably not. Is he crazy enough to try a coup? Doubtful (really). But can he create an awful lot of chaos as a way of bolstering his political capital ahead of his upcoming role as leader of a powerful opposition that now controls congress? Surely. The results are in, but the streets are waiting: your move, Jair.
China's COVID curbs hit Disney, iPhones
Xi Jinping won't let zero-COVID go, no matter how much damage it does to China’s sputtering economy — or to people just having fun. Disney Shanghai shut its gates Monday after the city of 26 million reported a measly 10 infections, leaving visitors stuck inside. The park’s rides are still operating, which is a small bonus for visitors trapped until they test negative three times (this happened last November, with 30,000 people inside the park). Even more troubling, over the weekend employees began sneaking out of Foxconn's largest iPhone factory in Zhengzhou, the capital of Henan province, after being locked down for days in their dormitories with dwindling food supplies amid a COVID outbreak. If a significant chunk of the 200,000-strong workforce vanishes, the factory's output of iPhones could plummet by as much as 30%. It's not just Apple devices – before the pandemic, the plant was China's third-largest exporter, shipping $32 billion worth of electronics per year. As “forever” zero-COVID threatens to further snarl global supply chains ahead of the holiday season, Xi might take over Joe Biden as this year’s Grinch.
Iran to publicly try 1,000 protesters
Tehran said Monday it’ll hold public trials for 1,000 demonstrators arrested during the ongoing protests over the in-custody death of Mahsa Amini, who was reportedly beaten by the morality police for “improperly” wearing her hijab. Authorities say the defendants played an “active role” in the largest protests the country has seen in a decade. But there are no figureheads for the movement, and the women of Iran have been joined in the streets by students, labor unions, and oil workers. The public trials intend to signal that Iran’s leaders will not tolerate dissent against the theocratic republic that has called the shots since 1979. What's more, some of the protesters have been charged with crimes that carry the death penalty; if found guilty, they could be publicly executed. Iran usually hangs death row inmates inside prisons, but perhaps this time the ayatollahs think mass public executions might show protesters — and the world — that they won't give up an inch of power. Will this spark fear, as intended, or revolution?US President Joe Biden
Hard Numbers: Biden’s pardon powers, Beijing learns from Shanghai, Japan unveils relief package, Russia’s “anti-gay” machoism
3: Using his executive clemency powers for the first time, President Joe Biden on Tuesday pardoned three people and shortened scores of other sentences. The most high-profile person to get clemency was Abraham W. Bolden, the first Black Secret Service agent to serve in a presidential detail. He was found guilty of bribery charges but has maintained his innocence. The other two pardonees were incarcerated for drug-related offenses.
20 million: With just a few dozen cases identified, authorities will test Beijing’s 20 million residents for COVID-19 in an attempt to avoid the citywide lockdown seen in Shanghai, which caused widespread social dislocation and a government backlash. Concurrent lockdowns in Shanghai and Beijing would further disrupt China’s economic output.
8: Vitaly Milonov, the lawmaker who pioneered Russia’s anti-gay “propaganda” legislation, which banned the “promotion of non-traditional sexual relations,” is hosting a new YouTube show called “I’m not gay.” The weird series tests the heterosexuality of eight participants with the aim of outing the one among them who’s indeed gay.
6.2 trillion: Japan’s government unveiled a 6.2 trillion yen economic relief package to help families and small businesses deal with the rising cost of living as a result of the pandemic and the war in Ukraine. The yen’s value against the US dollar has tumbled to a 20-year low, creating disagreement among policymakers on whether Tokyo should continue its tactic of pursuing a weaker currency for its export-reliant economy.Hard Numbers: Fenced-off Shanghai, Tigrayan soldiers seek asylum, Saudi royals sell assets, overtaxed Argentine farmers
6: After partly relaxing its COVID-19 lockdown last week, Shanghai is now erecting metal barriers to keep people indoors in high-risk districts. Frustration among residents is mounting, as seen in a six-minute video about the lockdown’s impact that's gone viral on Chinese social media despite censors' attempts to block it.
500: Over 500 Ethiopian soldiers from the war-torn Tigray region deployed as UN peacekeepers in Sudan say they won't return home because they fear for their safety. They want asylum in the neighboring country, which has a beef with Ethiopia over a controversial dam on the Upper Nile.
600 million: Big-spending members of the Saudi royal family have recently sold more than $600 million worth of art, real estate, and yachts stashed in the US and Europe. The royals are worried about getting cut off by de-facto ruler Crown Prince Mohammed bin Salman, who — by Saudi standards — is somewhat more frugal.
64.9: Thousands of Argentine farmers took to the streets of Buenos Aires on Saturday for an anti-tax protest. You'd probably do the same if an estimated 64.9% of your income went to the government.Volunteers in protective suits prepare to disinfect a residential compound in Shanghai.
That April night, they died in Shanghai
Since Shanghai's 26 million residents started a grueling lockdown on March 28, I have been checking social media more often. On April 13, I opened Weibo, aka China’s Twitter, and browsed to see what was happening in Shanghai, and I came across a piece of news that was going viral.
A Chinese health official named Wenxiong Qian had killed himself in his office.
Shanghai authorities confirmed Qian’s death a day later but didn’t respond to the widespread rumor that his death was related to the burden and pressure of work during Shanghai’s rigorous lockdown. And the full reason for his death will probably remain unknown to the public, as I’ve seen so many times with incidents in China. “The answer is blowing in the wind” – that’s what we always say to comfort each other.
But Qian was not the only one who died prematurely in Shanghai this past month.
On the night of March 23, when Shanghai was still partially locked down, a nurse named Zhou Shengni died after being turned away from the hospital where she worked. That night, she suffered from acute asthma and didn’t feel better after taking medicine. Her family drove her to Shanghai East Hospital, her workplace and the closest hospital – the one she trusted most – to get her immediate help. But she was refused entrance. Zhou died in another hospital four hours after leaving home to seek treatment. Shanghai East Hospital published a memorial after her death, noting that the hospital’s ER had been closed that night for a COVID disinfection and containment process.
On the night of April 4, a cancer patient made his way to the ER but was refused treatment because he didn’t have a PCR test, according to his family. They waited a long time, and he felt short of breath and had chest pain but could not get help. His heart stopped while awaiting his results, and his last words were, “Mom, could you ask the doctor, did they get my PCR result?” He left behind his five-year daughter, his elderly mother, and his beloved wife, who shared this story with the public on Weibo.
Hsien Ping Lang, an influential economist in China, lost his 98-year-old mother. She had a kidney condition and waited in the ER for a nucleic acid test in order to be treated. She died during her four-hour wait, and Lang was unable to see her one last time owing to Shanghai’s lockdown.
They did not die of COVID but because of the Chinese government’s firmly practiced zero-COVID policy.
Shanghai, China’s main economic hub, has been under lockdown for three weeks. I lived in Shanghai for four years during college, and every time people ask me about China, I tell them, “You should go to Shanghai. It is the best city in China.”
The Pu Dong District on the eastern bank of Huangpu River represents the development of China after the economic reforms of the 1980s. Pu Xi, the western bank, represents the old glory days when China was revolutionizing and finding its own way in the early 20th century. Importantly, in 1921, the Chinese Communist Party was founded in Shanghai.
The city was once a source of great pride for many Chinese people, including me. But that all fell apart this month when the city was shut down and people began to really suffer.
There’s been news of a dog being killed by a health worker in the street. Kids who tested positive were forcibly separated from their parents. The elderly can’t access enough food and medication. Patients are struggling to get access to cancer treatment and dialysis. And some are being forced to leave home and go to quarantine facilities even if they receive a negative test result.
Is this still the Shanghai I once loved? Is this still the Shanghai I once firmly believed would be the frontier of positive change in China?
Chinese people have long known they don’t have the same amount of freedom as the rest of the world, but many accepted the notion of “sacrificing many rights for a greater common good.” But now more people are realizing that even if they are sacrificing their freedom, it does not necessarily help them or society end up in a good place.
To this day, Chinese society is divided over the right thing to do, and many people outside Shanghai are still supporting the zero-COVID policy. They believe the lockdowns are worth it to keep the elderly and immunocompromised safe – and yet it is those very people who are suffering the most during the current lockdown.
China had only around 100,000 COVID cases before the omicron variant spread this past month, and its economic growth outperformed other major economies in 2021. I would argue that the zero-COVID policy helped buy China two years of near-normalcy. But is it anymore?
“April is the cruellest month, breeding
Lilacs out of the dead land, mixing
Memory and desire, stirring
Dull roots with spring rain.
Winter kept us warm, covering
Earth in forgetful snow, feeding
A little life with dried tubers.”
- T.S. Eliot
To stick with zero-COVID or not, that’s now a question for every Chinese person – if only they had the choice.